how to create a sku

UPC, SKU & Barcodes | What’s the Difference and why do I Need One?

You found out that you need a UPC, SKU or barcode, but not sure what the differences are?  We have the answers on what these are, what they are used for and how to get them!

First off, some definitions are in order.

What is a SKU?

SKU which stands for Stock Keeping Unit, is a set of alpha-numeric characters that are internally generated by a business to make it easier to track and manage inventory. The characters in the SKU are a form of shorthand and can be used to distinguish products from each other with information such as model, material, size, color, cost, etc.

What is a UPC?

A UPC, which is short for Universal Product Code, is a 12-digit numeric based code that a business uses to uniquely identify their product.   You may hear the term GTIN (Global Trade Item Number) when talking about UPCs, which is the same thing.  UPC codes originate through a single non-profit organization called GS1.  Just about every product purchased at retail has a UPC number.  This code is required by most retailers and distributors since it makes for a standard way of identifying products.

What is a barcode?

When talking about labeling products, the term bar code often comes up.  The term barcode is often being used in place of the UPC information printed on a label.  The barcode is used by scanners to read the black, vertical lines of various widths and the width of the bars represents a number.

SKU vs. UPC – Which to use

When a product is sold through another channel (such as a retailer or online marketplace like eBay or Amazon), they are often required to have a unique number which is the UPC.  This unique number differentiates one unique product from another.  When a product is shipped to a distributor or retailer to resell, they often generate a SKU to internally better manage that item in their inventory system.

How to read a UPC Barcode

Barcodes may look like a random assortment of lines and numbers.  The vertical lines are used so scanners can read the information, but those lines are associated with the numbers which provide some information.

How to get a upc code

The UPC is a series of 12 numbers and are broken into the company prefix, item reference number and a check digit.

Company Prefix

The company prefix is the first six to ten digits on a UPC barcode and is  The company prefix is a unique identifier of the product’s manufacturer and types of goods sold.

There are two parts of the company prefix which include the product information and the manufacturer’s identification code.

The first number on the far left provides some information on the type of product.

  • 0, 1, 6, 7 & 8 – Common products
  • 2 – Products that are sold by weight
  • 3 – Drugs of pharmaceutical product
  • 4 – Non-food item
  • 5 – Coupon

The next component of the company prefix is the manufacturer’s identification code.  These 5-8 numbers are a unique number assigned to a company.

Item Reference

The next series of numbers is the item’s product number.  This number is assigned by the company to the individual product the UPC is being created for.   This number would be different for each variant of the product like size, color, etc.

Check Digit

The last digit on a barcode label is called a check digit. The check digit detects errors in the code through a calculation.   This helps ensure the other numbers on the barcode are correct.

How to get a UPC code

There are a few different ways to get a UPC code for a product.  You can create a free UPC by Googling “free UPC” or “UPC generator”. Products with these types of barcodes aren’t accepted by most retail stores or online marketplaces like Amazon and eBay because the code may not be unique.  If the codes aren’t unique, managing inventory is next to impossible.  The free barcode option is really only useful if you are selling your own products through your own website and maybe some local stores.

If you are selling a product at a larger retail store, through most distributors or online marketplaces, a GS1 (Global Standard 1) certified UPC is required.  GS1 UPCs are managed through a non-profit organization that ensures each barcode is unique globally, which is critical in keeping products moving from the manufacturer to the final customer.

There are two options for getting a GS1 barcode.

One is to purchase directly from GS1.  This option provides a code that is totally unique to the manufacturer.  This guarantees that the code is yours and all retailers and marketplaces will accept it.  It does come at a cost.  Depending on the number of items are being sold, the initial price ranges between $250 and $10,500 and an annual renewal fees of $50-$2,100.

It’s becoming more important that the company prefix is traceable back to your business as more and more retailer, both online and off, are requiring it.  Amazon has even warned that they may enforce in the future.

The second option is to purchase a GS1 certified barcode from a reseller.  This option is a lot less expensive and the reason it is less expensive is that the manufacturer’s code won’t be unique to your business.  The code would have either been assigned to another manufacturer in the past and they don’t need it anymore or the manufacturer’s code belongs to the reseller.

The cost is significantly less, but there is risk that your product may no longer be sold through the retailer or online marketplace.

How to create a SKU

SKU numbers make it easier to find, identify and manage the products a business is selling.

Unlike the UPC registration where there is a standard code when creating it, the coding of a SKU is completely up to the business owner since the purpose of the SKU is to manage inventory internally.

While SKUs can be made with any combination of numbers and letters, it’s important to create a standard format to follow.  Consider the attributes you want to track (such as size, color, shelf location, date purchased, the price paid and so on) and be consistent in the format.

Tips for creating SKU numbers

  • Stay away from characters that look like both letters and numbers, such as the letter “O” and the number “0,” or the letter “l” and the number “1.” These types of characters can make codes harder to decipher.
  • Be careful in using special characters like “/”, “>”, “*”, etc that not only make it harder for employees to remember but may result in errors in a spreadsheet.
  • 4-8 characters is a common SKU length for many businesses.
  • Consider using a few letters in addition to numbers as letters can be easily coded to have meaning.
  • Keep the letter coding simple so employees can quickly decipher the code and identify the product.

In closing, when deciding on creating labeling for your products, make sure to consider the longer-term goals of where that product is going to be sold.  While it’s tempting to go with the lower price UPC, it may limit your ability to sell in other places in the future.

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